Coty Inc. is facing a securities class action lawsuit after a sharp year over year deterioration in operating performance, the abrupt departure of CEO Sue Y. Nabi, and the withdrawal of its fiscal 2026 guidance rattled investors. The case, led by plaintiffs’ firm Hagens Berman, focuses on whether Coty misled the market about segment trends and its growth trajectory in the months leading up to a disappointing Q2 2026 earnings release.
What Triggered The Lawsuit
The proposed class action covers investors who bought Coty shares between November 5, 2025 and February 4, 2026, with a lead plaintiff deadline of May 22, 2026. On November 5, 2025, tied to its Q1 2026 results, Coty reaffirmed an adjusted EBITDA target of $1 billion for FY 2026.
Nabi said, “We remain laser focused on strengthening our profitability and balance sheet, with our fiscal year 2026 business trends steadily improving in line with our expectations”.
The complaint alleges those assurances were misleading because Coty did not fully disclose that its Consumer Beauty segment was underperforming, that margins were being squeezed by higher marketing spend, and that growth in Prestige fragrance was slowing. On December 12, 2025, the company announced Nabi’s departure without detailed explanation, a move that pushed the share price lower and raised fresh questions about strategy and execution.
The situation escalated on February 5, 2026, when Coty reported Q2 2026 results, like for like net revenue fell 3%, adjusted operating income declined 18% to 19%, and segment pressure was stark, Consumer Beauty’s operating income dropped more than 70% year on year, while Prestige operating income fell over 18%. The company also withdrew its FY 2026 EBITDA and free cash flow guidance and warned that Q3 like for like revenue was expected to decline mid single digits, driven mainly by steeper declines in Consumer Beauty. This update sent Coty’s share price down more than 8% in a single day.
Inside The Allegations And Hagens Berman’s Focus
Hagens Berman’s case centers on whether Coty’s public statements accurately reflected internal realities in its Prestige and Consumer Beauty segments and the impact of its digital inventory transition to SAP S/4HANA. The firm notes that Coty repeatedly described the system transition since August 2024 as having gone off without a hitch, even as management acknowledged related inventory buildup, which may have later contributed to destocking and margin pressure.
Hagens Berman partner Reed Kathrein said “We’re investigating whether Coty may have intentionally misled investors about its segment business trends and, if so, whether the year-over-year softness might be related to earlier reported destocking issues. We’re also looking at the circumstances surrounding Ms. Nabi’s abrupt and unexplained departure. ”
A separate notice from Glancy Prongay & Murray also highlights the shock to investors, pointing to Q2 2026 figures showing net revenue down 6% like for like, reported gross margin down 200 basis points, adjusted operating income down 19%, and guidance fully withdrawn.
What The Numbers Say About Coty’s Pressure Points
Recent filings and coverage paint a picture of mounting strain even before Q2 2026. For FY 2025, Coty reported operating income of $241.1 million, down 56%, and a reported net loss of $381.1 million despite relatively stable adjusted operating income. Ahead of FY 2026, S&P Global Ratings had already revised Coty’s outlook to negative, forecasting a roughly 2% revenue decline for the year and warning that persistent volatility could pressure credit metrics.
Against that backdrop, the steep Q2 2026 drop in segment operating income and the sudden removal of $1 billion EBITDA guidance look less like a blip and more like the reveal of structural challenges: slowing Prestige momentum, an underperforming mass portfolio and a promotional, destocking heavy environment eroding margins. For beauty competitors and retailers, this underscores how quickly shifts in demand, inventory planning and promotional intensity can unravel an optimistic earnings narrative.
Lessons for Brands to Avoid
The Coty case is a reminder that the distance between a confident earnings narrative and a securities lawsuit can be shorter than most executives expect.
- Do not reaffirm full year guidance when internal segment data is already signaling deterioration. Coty publicly reaffirmed a $1 billion EBITDA target in November 2025, only to withdraw it entirely just three months later.
- Avoid unexplained CEO departures. Nabi’s exit in December 2025 without a clear rationale became a central point of scrutiny in the complaint and compounded investor alarm ahead of the Q2 2026 miss.
- Never dismiss operational risk from system transitions as resolved. Coty’s SAP S/4HANA rollout is now under legal scrutiny for whether inventory buildup linked to the migration was adequately disclosed to investors.
